Investors need to know not to value Airbnb’s December IPO.
This year’s Airbnb IPO has generated buzz, with six new articles on average published about it each day in October. ▲Church uses the online marketplace to book vacation and remote work stays for its contributors. The San Fransisco based tech company planned its public offering for August. But weakened by volatility, a flawed business model, delays, and regulatory actions, Airbnb could be worth half as much as investors pay this December. So don’t be deceived or buy this stock when it goes public!
According to Money Morning, the value of Airbnb in 2017 was $31 billion. Last year, based on how its shares traded privately, the company demanded a $42 billion price tag. But Airbnb began promoting its public offering in 2015 then showed signs of trouble after news of the coronavirus pandemic drastically restricted travel. Since the company borrowed $2 billion last May its valuation dropped to just $17 billion. If Airbnb went public last year then the bulls would have lost a whopping 60% of their investment!
Before coronavirus restricted travel Airbnb was slated to go public in August. Then in August Airbnb submitted confidential documentation to the SEC to take its shares public in the future. Airbnb stated it will go public before New Year’s Eve this year; if that’s the case, the company will make its public filing with U.S. regulators in November. The most anticipated IPO of 2020 plays America’s reaction to its Presidential election and debuts before Christmas.
That turbulence isn’t all this article warns investors about! Companies sell stock to the public in order to grow. Just not everyone is equipped for frequent moves, deceptive listings, downmarket locations away from attractions, exposure to crime (fraudulent hosts), or substandard accommodation provided by amateurs who are encouraged by Airbnb. In business since 2008, Airbnb is widely reported, heavily advertised, and doesn’t own assets generating its revenue; capital won’t grow its market share, customer satisfaction will. Yet the company has become the enemy of communities, governments, competitors, its own employees, and especially guests who spent more on the platform than rent for long-term stays. Don’t invest and help Airbnb raise its next $3 billion.
Top reasons not to value an Airbnb IPO
Opposition by community groups like We Live Here, Fairbnb, and Residents 3000 led to regulatory reforms which negatively impact Airbnb’s profit.
Already, Airbnb is working directly with 500 local government regulators. Recently, The European Union upheld laws enacted by cities to crackdown on Airbnb’s platform of short-term rentals on private homes. And after paying taxes in London Airbnb’s bill tripled. The company is being targeted by legislation that affects its profit model; complying with thousands of local jurisdictions is an added expense, deals a blow to profitability, and lowers the company’s value.
Real revenue will level off, targeted taxes will rise, and the public company will face lawsuits (travel cancellations, wrongful death, fines). According to eTN, safety issues arising from its business model have led to local concerns that negatively portray Airbnb to investors. According to The Irish Times, an IPO this year couldn’t make Airbnb any worse!
When Airbnb took $2 billion in “emergency funding” last May it also laid off one quarter of its workforce, leading to a rise in unemployment claims from Airbnb. After its disruption to tourism markets impacted hotels’ viability and employee’s survivability the hotel industry filed for a federal bailout and Airbnb’s effect on labor could lead to retaliation.